Chicago Board of Trade's IPO shines

Shares of futures and options bourse rockets 49%

SteveGelsi

NEW YORK (MarketWatch) -- Chicago Board of Trade shares rallied 49% in their stock market debut Wednesday, as the 157-year-old futures and options exchange drew strong support on Wall Street.

CBOT Holdings Inc.
BOT, +18.01%
closed at $80.30 as it chalked up a hefty gain over its $54 IPO price. The stock opened at $80.75, hit a high of $86.75 and a low of $80 in its debut.

The performace marks one of the best kickoffs from a U.S.-based IPO this year behind the 69% rise by the International Securities Exchange
ISE, -0.04%
in March.

The success of the CBOT's IPO came partly because the bourse has "done an impressive job" in fending off a challenge from rival derivatives trading firm, Eurex, said Bill Cline, capital markets industry leader for Accenture.

In the past two years, the CBOT has quieted internal dissent over electronic trading and cut its prices in the face of Eurex's move into the U.S. market, he said.

Looking ahead, the CBOT will likely move to grow aggressively as a public company through new products and possibly contribute to the consolidation trend in the financial markets business, he said.

Shaking off jitters in the sector growing out of the status of Refco Inc. and a reported buyout attempt over the summer from rival Chicago Mercantile Exchange
CME, +0.37%
the CBOT priced well above its $45-to-$49 estimated range.

Chicago Merc's IPO priced at $35 a share in its IPO on Dec. 6, 2002, and has since seen its shares climb to $330 a share.

CBOT's IPO price of $54 a share marks the highest for a U.S. IPO this year, but the relatively small number of shares offered in the deal -- 3.19 million -- helped stoke demand.

The CBOT is lending a much-needed boost to the IPO market, which has seen one of its summer stars -- Refco -- implode in the face of an accounting scandal.

Elsewhere in the IPO market, San Francisco-based investment bank Thomas Weisel filed to raise $65 million in an IPO. See full story.

Roots trace back to 1848

The company, which traces its roots to 1848 when Chicago merchants traded contracts above the Gage & Haines flour store in downtown Chicago, raised $172.3 million with a team of bankers. CS First Boston, J. P. Morgan, Citigroup, Keefe Bruyette & Woods and Sandler O'Neill took part in the deal.

Nowadays, more than 3,600 CBOT members trade 50 futures and options products by open auction and electronically.

The CBOT ranks as the world's third largest derivative exchange. CBOT volume in 2004 was a record-breaking 599 million contracts.

In its early history, the CBOT traded only agricultural commodities such as corn, wheat, oats and soybeans. Futures contracts at the exchange evolved to include non-storable agricultural commodities and non-agricultural products.

Renaissance Capital, which runs the IPO Plus Fund
IPOSX, -0.95%
voiced concerns about the CBOT's volume growth, with slowed to 17% through September, down from 27% annual growth from 2000 to 2004.

"While much of this can be attributed to declining volatility in long-term interest rates, which is out of the company's control, investors will keep an eye on this trend," Renaissance Capital said in its IPO of the week column. See full story.

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